Qantas 2011 Annual Report Download - page 40

THE QANTAS GROUP 38
for the year ended 30 June 2011
Directors’ Report continued
What are the LTIP performance
conditions and how is
performance assessed?
During / the Remuneration Committee reviewed the design of the Qantas LTIP. Based on
this review, the Board implemented dual relative TSR hurdles for the LTIP and discontinued the use
of an EPS hurdle.
The EPS hurdle was discontinued as the setting of EPS targets each year for multi-year periods
for a cyclical industry presented considerable practical difculties.
LTIP Rights awarded during the year to  June  under the - LTIP will only vest in full if:
— Qantas TSR Performance ranks at or above the th percentile compared to the S&P/ASX Index and
— Qantas TSR Performance ranks at or above the th percentile compared to a peer group of listed
global airlines
These performance hurdles were chosen to provide a comparison of relative shareholder returns that
is relevant to most investors in Qantas:
— The S&P/ASX Index was chosen for relevance to investors with a primary interest in the equity
market for major Australian listed companies, of which Qantas is one and
— The peer group of listed global airlines was chosen for relevance to investors including investors
based outside Australia, whose focus is on the aviation industry sector
The vesting scale for each measure is:
Companies with Ordinary Shares included in the S&P/ASX Index
Up to one-half of the total number of Rights granted may vest based on the relative TSR performance
of Qantas in comparison to the S&P/ASX Index as follows:
Qantas TSR Performance compared to the S&P/ASX Index Vesting Scale
Below th percentile Nil vesting
Between th to th percentile Linear scale: % to % vesting
At or above th percentile % vesting
Basket of Global Listed Airlines
Up to one-half of the total number of Rights granted may vest based on the relative TSR performance
of Qantas in comparison to the basket of Global Listed Airlines selected by the Board as follows:
Qantas TSR Performance compared to the Airline Basket Vesting Scale
Below th percentile Nil vesting
Between th to th percentile Linear scale: % to % vesting
At or above th percentile % vesting
The basket of Global Listed Airlines has been selected with regard to nancial standing, level of government
involvement and its representation of Qantas’ key competitor markets. The basket of Global Listed Airlines
contains the following full-service and value-based airlines: Air France/KLM, Air New Zealand, American
Airlines, British Airways, Cathay Pacic, Delta/Northwest Airlines, Lufthansa, Ryanair, Easyjet, Singapore
Airlines, Southwest Airlines, Tiger Airways, Virgin Australia. (As indicated above, Air Asia will also be
included in the basket of Global Listed Airlines for awards made in the year ending  June 
under the - LTIP).
How are Rights treated
on termination?
Any Rights which have not vested will lapse if the relevant Executive ceases employment with the
Qantas Group, except in limited special “good leaver” circumstances provided under the LTIP Terms
and Conditions (for example, retirement, death or total and permanent disablement). Rights will also
lapse if the Executive is guilty of gross misconduct.
What are the performance
hurdles for awards made
in prior years that have not
yet vested?
For the  Performance Rights and the - LTIP awards the performance conditions were:
— The relative Total Shareholder Return (TSR) of Qantas compared to the S&P/ASX Index,
using the same vesting scale detailed above and
— An Earnings Per Share (EPS) target, using the vesting scales detailed below
Up to one-half of the total number of LTIP Rights awarded under the - LTIP may vest subject
to the follow scale:
EPS Performance (for the year ended  June ) Vesting Scale
EPS result below threshold of $. Nil vesting
EPS result between threshold of $. and stretch target of $. Linear scale: % to % vesting
EPS result at or above stretch target of $. % vesting
The EPS hurdles do not represent an earnings forecast, nor are they a disclosure of targets under Qantas’
long-term budget. The target was set at a level that returns Qantas earnings to the levels achieved from
/ to /.
For the  Performance Rights awards, the EPS threshold and stretch target were expressed as
compound annual growth rates. The EPS threshold was a compound annual growth rate of . per cent
growth and the stretch target was a compound annual growth rate of . per cent.
Remuneration Report (Audited) continued